Crisis deepens as banks demand wage freeze

By Teresa Gutierrez, in Workers World,7 January, 1995.

While the dauntless Zapatista National Liberation Army was
commemorating the first anniversary of its uprising in Chiapas,
the Mexican government was becoming more and more indebted to the
whims of international finance capital.

The crisis rocking Mexico's economy confirms the profound effects
that the prospect of mass struggle can have on the ruling class.

On Dec. 19, when the EZLN took control of almost 40 towns in the
state of Chiapas, Mexico's economy reeled. Foreign investors
immediately bailed out of Mexican financial markets in a rush.
The central bank's reserves plummeted from $17 billion at the end
of October to $6.5 billion.

A DE FACTO WAGE CUT

The government then dramatically devalued Mexico's currency, the
peso. It was allowed to float against other currencies, and fell
still further.

This 30-percent decline of the peso produced the equivalent of an
across-the-board wage cut as prices of basic commodities soared.

The economic crisis was portrayed by bourgeois economists as one
of the worst since the 1980s, before Mexico's so-called economic
miracle. Wall Street, the U.S. government and the International
Monetary Fund were all anxiously awaiting the word from Mexico's
newly inaugurated president, Ernesto Zedillo. He was to unveil a
"rescue plan" to save the situation.

But his speech unveiling the plan, scheduled for Jan. 2, had to
be postponed as union leaders refused to go along with its key
demand: a wage freeze.

According to the New York Times of Jan. 2, it is the Mexican
government's job now to "convince foreign investors that the
Mexican market they once thought the world of was not a mirage."

These investors, over two trading days before the peso was
devalued, took nearly $2 billion out of the country. By
Christmas, they had pulled out a whopping $10 billion.

How quickly a friend becomes a stranger in the capitalist world.
Before NAFTA, these same cutthroat investors did all they could
to expand the Mexican economy. In 1993, for example, they ordered
the U.S. government to prop up the peso with a $12-billion line
of credit. Of course, that money has to be paid back, with
interest.

The U.S. capitalist government is not about to abandon the
current Mexican establishment. President Bill Clinton said on
Dec. 29 that Mexico has made a "serious commitment to
reform"--meaning an assault on the workers--"and I would like to
see that rewarded."

A member of the U.S. Congress said anonymously that rather than
ask a Republican-dominated Congress for funds to lend Mexico, the
Treasury Department is likely to use a little known resource, the
Exchange Stabilization Fund.

WHOSE CRISIS IS IT?

The onus for the current economic crisis is being put on the
Mexican government. Economic analysts are saying that Mexico is
like Orange County, California: "It did not realize how risky its
economic strategy was until too late."

These same analysts blame the crisis on Mexico's $30-billion
trade imbalance and on its exchange rate. Others complain that
the peso was not devalued in an orderly fashion.

Even though Mexico followed just about every single demand made
by the IMF, it still couldn't do enough for it.

But what and who is really to blame for this economic crisis? Why
should funds from the U.S. Treasury be used to bail out the
banks, instead of helping workers here? Whose crisis is it,
anyway?

The crisis belongs to the bankers, and they should pay for it.
Crises, it should be remembered, are inevitable under the
capitalist system, no matter who administers it.

Wall Street, after all, devised the plan for opening Mexico to
further U.S. capitalist domination via implementation of the
North American Free Trade Agreement. Now many of these same
investors are pointing a finger at Mexico, trying to disavow
their own work.

In early December 1994, when the Clinton administration held its
lavish Hemispheric Summit in Miami with the heads of state of
most nations of Latin America, many political gains were made for
the U.S. One of them was to bring Chile into the free trade
agreement.

Mexico no longer enjoyed an "exclusive relation" with the U.S.
and Canada. This little-talked-about deal with Chile has
contributed to the crisis in Mexico.

'ZEDILLO PLAN'--MADE IN STANFORD?

Now the bankers are playing hardball with the Mexican government.
President Zedillo was trained at Stanford University in
California, and the captains of international finance expect him
to apply the economics he learned there.

They are demanding measures that will assure profits at the
expense of the workers.

The "Zedillo plan" to put a lid on wages, prices and government
spending comes from the imperialist bankers. They have clearly
stated they want a national agenda that will result in more
privatization and more cutbacks.

And the Mexican government continues to try to do their bidding.
Jaime Serra Puche, Mexico's former finance minister who was
described as "bringing home NAFTA," is no longer needed. He has
been replaced by Guillermo Ortiz Martinez, who functioned as an
executive director of the IMF from 1984 to 1988 and is sure to
help carry out the demands of international finance capital.

But the bankers want to have their cake and eat it too. Even as
they demand harsh economic measures, they also tell Zedillo he
must control the social unrest that is smoldering around the
country.

When the Zapatista Army took yet another bold step on Dec. 19, it
made it clear to the world that this rebel army is not going
away. It showed that Wall Street does not have NAFTA all sewn up
in its hip pocket.

The steady resistance of the indigenous army in Chiapas shows
NAFTA to be a mere piece of paper before the awakened masses. It
is the struggle of the masses--and not IBM or American Express--
that is decisive in determining the outcome of any secret
agreement made on Wall Street.